She said individuals and corporate bodies could now open foreign currency accounts in nine denominations, up from five. “In this regard, we wish to advise exporters and the general transacting public that in addition to opening of accounts denominated in Botswana pula, British pound sterling, euro, South African rand, United States dollar, individuals and corporates can also open accounts denominated in the Australian dollar (AU$), Chinese yuan (CYN), Indian rupee (INR) and Japanese yen (JPY),” said Dr Dhliwayo.
In an earlier statement, Dr Dhliwayo said the Reserve Bank had set eight percent per annum as the ceiling for bank interest rates to guide lending and borrowing.
“The proposed indicative yields of 6.6 percent for 91 day instruments, 7.2 percent for 180 day instruments and 8 percent for 365 days (1 year) instruments are envisaged to sanitise the country’s interest rate structure, which has curtailed deposit and credit growth,” she said adding, “This yield curve acts as a guide to the structure of interest rates, especially the Treasury Bill rates.”
Banks have been charging lending interest rates of up to 35 percent per annum while interests on deposits has been as low as 0,15 percent.
Dr Dhliwayo said the policy placed emphasis on the revival of the banking sector in line with the Zim Asset goals. The policy statement has been met with mixed views by economic analysts.
Some analysts said the move will restore confidence in the vital banking sector and encourage people to make deposits thereby availing funds for borrowers at affordable interest rates.
Others say it is a non-event as it does not indicate where the money to fund the expected growth would come from. Bongani Ngwenya the dean at the Faculty of Business at Solusi University said by setting the ceiling, the RBZ move would influence interest on lending to go down to about 10 percent while interest on deposits was likely to rise.
“Provided availability of cash improves, lower lending rates by banks will make it cheaper for companies and individuals to borrow money. This will avail finance for capital projects that will stimulate economic growth,” he said.
Ngwenya said higher interests on deposits will encourage people to bank money and at the end of the day banks will have money for those that want to borrow.
“Depositors have been reluctant to bank money because of the ridiculously low interest rates on deposits,” he said.
Ngwenya said since dollarisation in 2009, the RBZ has not been able to fully play its role of influencing interest rates, adding: “This positive intervention by the central bank augurs well for the economy.”
However, he said the introduction of more foreign currency denominations was likely to worsen the problem of cross rating, whereby the same currency is exchanged for differing rates in various parts of the country.
He said a positive would be that there would be less hassles in acquiring foreign currency to import from the country’s growing markets in China, India, Australia and Japan.
Ngwenya emphasised that the central bank needed to put in place strong monitoring mechanisms to ensure positive change.
Another economist John Robertson said the policy would make little economic difference if the RBZ does not find ways of improving the liquidity situation.
“If money is in short supply, interest rates will increase. The real problem here is the shortage of money. Fixing rates will not solve much. RBZ should tell us how they plan to increase the money in circulation,” said Robertson.
He said lowering of lending and borrowing rates would benefit borrowers but not depositors.
“Depositors need more incentive because as events in recent months have shown, it is risky to put money in certain banks as you may lose it,” said Robertson.
The economist said introducing more currencies would be a non-starter adding; “we are already using the pound, euro and pula but you hardly see these currencies in circulation in most parts of the country. The new currencies are likely to suffer the same fate.”